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Bloggers Suggest Obama Administration Intended HAMP as a Bailout of Lenders

August 31, 2010

As Riverside County loan modification attorneys, we were interested to see an article discussing a recent meeting the Treasury Department held about HAMP -- the Home Affordable Modification Program. This is the government-backed loan modification program that has come under fire in many quarters for being ineffective. As the New Republic Online reported Aug. 24, the Treasury Department invited some financial bloggers to meet with officials on various housing finance subjects, including HAMP. At that meeting, the NRO said, some people were surprised to learn that Treasury considered HAMP successful in at least one respect -- in that it slowed the number of foreclosures and stabilized the national housing market. The NRO suggested that this was obvious -- that the intention had always been to "bail out" the banks.

Unlike the NRO, some bloggers reacted with apparent surprise to the idea that individual homeowners were not the intended beneficiaries of HAMP, calling it "cynical" and "cruel" of the government to mislead people about this. The NRO suggested that this was a naïve reaction, saying it had always thought HAMP was "a backdoor bailout for banks" and federal mortgage guarantors Fannie Mae and Freddie Mac. (It appeared to be arguing that this was so because of restrictive rules that applied to refinancing, although the bulk of the article appeared to be about loan modifications, a separate arm of the Home Affordable program.) The article went on to further criticize HAMP for creating "bad incentives" for homeowners, to intentionally fall behind on their mortgage payments in order to qualify for HAMP, only to see their permanent modifications denied at the end of the three-month trial. And so many permanent modifications were denied, the article suggested, because Treasury encouraged banks to start their trial modifications without enough time to fully vet the borrowers.

Our Westminster loan modification lawyers see some merit in the argument that HAMP was intended to help banks rather than borrowers. That has certainly been the effect, and one reason for that effect is that HAMP provides no way at all to enforce the promises lenders make to taxpayers. Stabilizing the housing market was a stated goal for HAMP at the time. So in that sense, if it eased the flood of foreclosures, it has indeed succeeded, even if it did not ultimately save many homes. However, the rest of the NRO's criticisms appear to ignore the role of lenders and loan servicers in HAMP. The government never required borrowers to be behind on their mortgages to participate in HAMP; this was a requirement from some lenders, and it was heavily criticized in the media. Similarly, lenders have control over whether to make the modifications permanent and have attracted a lot of criticism for cases where they declined to make them permanent without any change in the borrower's finances. Finally, the assertion that lenders were rushed into HAMP is simply untrue; many took well over three months to offer any program, and again, were heavily criticized for delaying action so long.

Howard Law PC has followed the housing crisis since its beginning because we have been helping homeowners fight unfair foreclosures since at least 2008. Our La Habra loan modification attorneys have been able to win loan workouts for many clients in that time, including changes to loan structure, lowered interest rates, expanded repayment periods and other changes. Even in cases where clients have had no luck on their own, we are often able to get results when we speak directly with the lender or loan servicer. We attribute this success to the fact that we are attorneys -- and that lenders know we can sue them for illegal behavior. In fact, we prefer to reach a modification without litigation, but in cases of predatory lending or gross negligence, we are more than happy to protect our clients' rights in court.

If you're struggling to get your lender's attention and it's just not working, Howard Law can help. To learn more or set up a free consultation, contact us online or call 1-800-872-5925.